1. Overview Ch. 4  Describe the factors that influence consumer behaviour online  Describe how companies are building one-to- one relationship with customers  Discuss the issues of e-loyalty and e-trust in EC  Describe consumer market research in EC  Describe the objectives of web advertising on the web  Describe various online promotions

2. Company-Centric B2B and Collaborative Commerce

3. Learning Objectives  Describe the major types of B2B models  Describe the characteristics of the sell-side marketplace  Describe the sell-side intermediaries models  Describe the characteristics of the buy-side marketplace and e-procurement  Explain how forward and backward auctions work in B2B  Describe B2B aggregation and group purchasing models  Describe collaborative e-commerce  Describe infrastructure for B2B

4. Concepts, Characteristics and Models of B2B EC  B2B EC or eB2B (electronic B2B) defined  Transaction conducted electronically between business over the networks Internet Extranets Intranets Private networks (e.g., EDI)  Automated trading improves the process  Market size and content  Expected to grow from $1.1 trillion in 2003 to $10 trillion by 2005  Percentage of Internet-based B2B from 2.1% in 2000 to 10% in 2005

5. Concepts, Characteristics and Models of B2B EC [2]  How is B2B conducted?  Directly between buyer and seller  Via an online intermediary: an online third-party that brokers a transaction between a buyer and a seller; can be virtual or click-and-mortar  With or without intermediaries  Types of transactions  Spot buying Purchasing of goods and services as they are needed, usually at prevailing market prices, which are determined dynamically by supply and demand  Strategic sourcing Purchases made in long term contracts that are usually based on private negotiation between sellers and buyers

6. Concepts, Characteristics and Models of B2B EC [3]  Types of Materials  Direct materials materials used in the production of a product (e.g., steel in a car or paper in a book)  Indirect materials materials used to support production (e.g., office supplies or light bulbs)  MROs (Maintenance, Repairs, and Operations) indirect materials used in activities that support production

7. Concepts, Characteristics and Models of B2B EC [4]  Direction of Trade  Vertical marketplaces Markets that deal with one industry or industry section Examples: electronics, cars, steel or chemicals  Horizontal Markets that concentrate on a service or a product used in all types of industries Examples: office supplies, PCs or travel services

8. The Basic B2B Transaction Types  Sell side  one seller to many buyers  Buy side  one buyer from many sellers  Exchanges  many sellers to many buyers  Collaborative commerce  communication and sharing of information, design, and planning among business partners

9. One-to-Many and Many-to-One: Company Centric Transactions  Company-centric EC  e-commerce that focuses on a single company’s buying needs (many-to-one, or buy-side) or selling needs (one-to-many, or sell-side)  Private e-marketplaces  markets in which the individual sell-side or buy-side company has complete control over participation in the selling or buying transaction

10. Many-to-Many: Exchanges  Exchanges  many-to-many e-marketplaces, usually owned and run by a third party or a consortium, in which many buyers and many sellers meet electronically to trade with each other  also called trading communities or trading exchanges  Public e-marketplaces  third-party markets that are open to all interested parties (sellers and buyers)

11. Virtual service industries in B2B  Travel and tourism services  Real estate  Electronic payments  Online stock trading  Online financing  Other online services

12. Benefits of B2B  Eliminate paper-based systems and reduces administrative costs  Expedite cycle time  Lower search costs and time for buyers  Increase employee productivity dealing with buying and/or selling  Reduce errors and/or improve quality of services  Reduce inventory levels and costs  Increase production flexibility, permitting just-in-time delivery  Facilitate mass customization  Increase opportunities for collaboration

13. Sell-Side B2B Marketplace Architecture

14. Sell-Side Marketplaces: One-to-Many  Sell-side e-marketplace  a Web-based marketplace in which one company sells to many business buyers, frequently over an extranet  3 major methods for direct sale in the one-to- many model:  Selling from electronic catalogs  Selling via forward auctions  One-to-one selling under a negotiated, long-term contract

15. Direct Sales from Catalogs  Companies may:  Offer one catalog for all customers  Customized catalog for each customer  Facilitate the B2B direct sale by providing the buyer with a buyer customized shopping cart  Configuration and customization  Efficient customization for direct sales  Business customers customize products, receive price quote, submit order

16. Direct Sales from Catalogs [2]  Benefits  Reduces costs (to buyers and sellers) and errors during the process  Speeds up order cycle  Ability to customize products  Offer different prices to different customers  Limitations  Channel conflicts with distribution systems  High cost when traditional EDI used  Large number of business partners is needed to justify system

17. Selling via Auctions  Using auctions on the sell-side  Revenue generation  Increased page views Stickiness—characteristic of customer loyalty to a Web site, demonstrated by the number and length of visits to a site  Member acquisition and retention Bidding transactions result in additional registered members

18. Buy Side Marketplaces: One-from-Many  Procurement methods  Buy from manufacturers, wholesalers, or retailers at their storefronts, from catalogs,and by negotiation  Buy from the catalog of an intermediary  Buy from an internal-buyer’s catalog  Conduct a bidding or tendering system  Buy at private or public auction sites  Join a group-purchasing system

19. Buy Side Marketplaces: One-from-Many [2]  Procurement management  the coordination of all the activities relating to purchasing goods and services needed to accomplish the mission of an organization  Inefficiencies in procurement management  Purchasing personnel spend time and effort on procurement activities  Qualifying suppliers & Negotiating prices and terms  Potential inefficiencies:  Delays or Paying too much for rush orders  Maverick buying—unplanned purchases of items needed quickly, often from non-approved vendors or at higher prices

20. Buy Side Marketplaces: One-from-Many [3]  Goals of procurement reengineering  Increase purchasing agent productivity  Lower purchasing prices of items  Improve information flow and management  Minimize maverick (unplanned) buying  Improve payment process  Streamline purchasing process to make it: Simple Fast

21. Buy Side Marketplaces: One-from-Many [4]  Reduce administrative processing cost per order  Find new suppliers and vendors to provide faster/cheaper goods and services  Integrate procurement process with budgetary control in an efficient and effective way  Minimize human errors in buying or shipping process

22. Buy Side E-Marketplaces: Reverse Auctions  Buy-side e-marketplace  Web-based marketplace in which a buyer opens an electronic market on its own server and invites potential suppliers to bid on the items the buyer needs; also called the reverse auction, tendering, or bidding model  Request for quote (RFQ)  The “invitation” to a buy-side marketplace (reverse auction)

23. Conducting Reverse Auctions  Reverse auctions administered from a company’s Web site  Bidding process lasts a day or more  Bidders may bid only once or view the lowest bid and rebid several times  Increasing number of reverse auction sites makes it impossible for suppliers to monitor all of them  Online directories list open RFQs  Use software search-and-match agents to reduce the human burden in the bidding process

24. Conducting Reverse Auctions [2]  Web-based reverse auction process  Buyers prepare bidding project information  Buyers post project on portal  Identify potential suppliers  Invite suppliers to bid  Suppliers download project information  Suppliers submit electronic bid  Reverse auction in real-time, or it can take a few days  Buyers evaluate and award contract

25. Benefits Reverse Auctions  Electronic process is faster  Administratively much less expensive  Enables location of cheapest possible products

26. Aggregating Catalogs  Aggregating suppliers’ catalogs: an internal marketplace  Maverick buying to save time leads to high prices  Aggregating all approved suppliers’ catalogs in one place  Reduced number of suppliers  Buyers at multiple corporate locations Fewer and remote suppliers Larger quantity/lower costs

27. Group Purchasing  Group purchasing—orders from several buyers are aggregated  Economy of scale  Reduced transaction processing cost  Putting together orders from multiple buyers to make large volumes/lower costs

28. Electronic Bartering  Electronic bartering  Exchange of goods or services without the use of money  Exchange a surplus for other need  Bartering exchange Submit surplus to exchange for points Points used to buy what company needs  Benefits: Faster than manually Easier to match

29. Collaborative Commerce (C-commerce)  Consisting of activities between business partners in jointly planning, designing, developing, managing, and researching products and services  Web-based systems used between and among suppliers for:  Communication  Design  Planning  Information sharing  Information discovery

30. Collaborative Commerce (C-commerce) [2]  Varieties of c-commerce:  Joint design efforts  Forecasting  Between and within organizations  Aids communication and collaboration between headquarters and subsidiaries, franchisers and franchisees  C-commerce platform provides e-mail, message boards, chat rooms, online corporate data access around the globe, no matter what the time zone

31. Barriers to C-commerce  C-commerce is moving ahead fairly slowly because:  Technical reasons involving integration, standards, and networks  Security and privacy concerns over who has access control of information stored in a partner’s database  Internal resistance to new models and approaches  Lack of internal skills to conduct c-commerce

32. B2B Infrastructure  Server to host database and applications  Software for executing sell-side (catalogs)  Software for conducting auctions and reverse auctions  Software for e-procurement (buy-side)  Software for CRM  Security hardware and software  Software for building a storefront  Software for building exchanges  Telecommunications networks and protocols

33. Integration  Integration with existing information systems issues  Intranet-based work flow  Database management systems (DMBS)  Application packages  ERP  Integration with business partners  Easy integration with one company-centric side  Not easy to integrate for many buyers or sellers

34. The Role of XML in B2B Integration  Companies interact easily and effectively by connecting to their servers, applications, databases  Standard protocols and data- representation schemes are needed  Web is based on the standard communication protocols useful only for displaying static visual Web pages:  TCP/IP  HTTP  HTML

35. The Role of XML in B2B Integration [2]  XML (eXtensible Markup Language)  Standard (and its variants) used to improve compatibility between the disparate systems of business partners by defining the meaning of data in business documents  Used to increase: Interactivity Accessibility

36. Summary  The B2B is very diversified and it can be divided into the following segments:  sell-side marketplaces  buy-side marketplaces  trading exchanges  c-commerce  Auctions play a major role in B2B  Increasing the exposure and/or the bargaining power of companies can be done by aggregating either the sellers or the buyers

37. Exercise  Why would a company want to decrease maverick purchases?  A firm wants to barter excess goods online for banner ads, but they cannot find a party willing to trade. What other options do they have?